Interest-Bearing Tokens Explained (InterestBearingMint Extension)

An interest-bearing token looks as if it pays yield just by sitting in your wallet. The balance creeps up over time with no transaction, no claim button and nothing to sign. This is a real Token-2022 extension, InterestBearingConfig, and you should know what it does and doesn't do before you build one or buy one.

The balance you see is calculated

InterestBearingConfig doesn't mint new tokens into your account, and nothing moves on-chain when the "interest" accrues. The mint stores an interest rate. Any wallet or app that reads your balance applies a continuous compounding formula, using the rate and the time that has passed, and shows you the result. That displayed amount is larger than the raw balance on-chain.

The raw token count in your account stays the same. Only the number you're shown changes, and it's worked out again every time something reads it.

Why it's built this way

The other option would be minting new tokens to every holder continuously. That needs either a trusted off-chain job that runs forever or a claim transaction for each holder, and both are much more complex and expensive than a formula every client can compute for itself. Because it's a calculation, the "interest" is the same everywhere at once, costs nothing to keep running, and doesn't depend on anyone operating a payout job.

What you set

At creation, InterestBearingConfig takes an annual rate in basis points. It can be positive, so the displayed balance grows, or negative, so it shrinks, which is useful for something like a voucher that loses value over time. It also needs a rate authority, the key that can change the rate later. Like any live authority, whoever holds it can change the rate whenever they like until it's revoked, so ask the same trust questions you'd ask about mint and freeze authority.

What it means for holders

The number your wallet shows only holds up in software that applies the same formula. It's a display rule that Token-2022-aware wallets and apps follow. You can't take the extra and spend it at the higher count. If you're looking at a token that uses this extension, ask what backs the implied yield. The extension only computes a number. It tells you nothing about whether anything stands behind that number.

Building one

Solstack's Token-2022 Creator sets the interest rate when it creates the mint. Enter an annual rate, positive or negative, and it applies from the moment the mint exists. The Token-2022 Creator docs cover the steps, including how it combines with the mint's other extensions.